QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For
the quarterly period ended September 30, 2015

OR

¨

TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-35050

ENDOCYTE, INC.

(Exact name of Registrant as specified
in its charter)

Delaware

35-1969-140

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification Number)

3000 Kent Avenue, Suite A1-100

West Lafayette, IN 47906

(Address of Registrant’s principal
executive offices)

Registrant’s
telephone number, including area code: (765) 463-7175

Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes
þ
No
¨

Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files). Yes
þ
No
¨

Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer
¨

Accelerated filer
þ

Non-accelerated filer
¨

Smaller reporting company
¨

(Do not check if a smaller reporting company)

Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
¨
No
þ

Number of shares of
the registrant’s Common Stock, $0.001 par value, outstanding on October 31, 2015: 41,975,549

PART I. FINANCIAL INFORMATION

Item 1.
Financial Statements

ENDOCYTE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

December 31,

September 30,

2014

2015

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$

45,533,443

$

31,015,168

Short-term investments

79,536,211

141,112,157

Receivables

706,403

84,987

Prepaid expenses

609,771

1,038,374

Other assets

652,510

446,903

Total current assets

127,038,338

173,697,589

Long-term investments

81,761,177

8,173,610

Property and equipment, net

3,970,665

3,565,191

Other noncurrent assets

31,194

181,971

Total assets

$

212,801,374

$

185,618,361

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

1,234,759

$

956,945

Accrued wages and benefits

2,567,924

2,706,517

Accrued clinical trial expenses

2,336,645

1,077,857

Accrued expenses and other liabilities

745,668

641,210

Total current liabilities

6,884,996

5,382,529

Other liabilities, net of current portion

30,316

21,853

Deferred revenue, net of current portion

881,944

844,445

Total liabilities

7,797,256

6,248,827

Stockholders’ equity:

Common stock: $0.001 par value, 100,000,000 shares authorized; 41,784,692 and 41,975,156 shares issued and outstanding at December 31, 2014 and September 30, 2015

41,785

41,975

Additional paid-in capital

373,571,500

379,245,052

Accumulated other comprehensive income

(143,928

)

23,401

Retained deficit

(168,465,239

)

(199,940,894

)

Total stockholders’ equity

205,004,118

179,369,534

Total liabilities and stockholders’ equity

$

212,801,374

$

185,618,361

See accompanying notes.

2

ENDOCYTE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

Three Months
Ended September 30,

Nine Months
Ended September 30,

2014

2015

2014

2015

(unaudited)

(unaudited)

Revenue:

Collaboration revenue

$

3,903,805

$

32,500

$

70,340,983

$

57,500

Operating expenses:

Research and development

5,675,547

6,581,458

37,652,243

19,922,716

General and administrative

4,006,751

3,776,575

19,476,356

12,207,080

Total operating expenses

9,682,298

10,358,033

57,128,599

32,129,796

Income (loss) from operations

(5,778,493

)

(10,325,533

)

13,212,384

(32,072,296

)

Other income (expense), net:

Interest income, net

161,081

152,763

413,980

489,728

Other income (expense), net

(57,722

)

171,062

(86,315

)

106,913

Net income (loss)

(5,675,134

)

(10,001,708

)

13,540,049

(31,475,655

)

Net income (loss) per share:

Basic

$

(0.14

)

$

(0.24

)

$

0.34

$

(0.75

)

Diluted

$

(0.14

)

$

(0.24

)

$

0.33

$

(0.75

)

Items included in other comprehensive gain (loss):

Unrealized gain (loss) on foreign currency translation

(5,848

)

123

(34,348

)

(1,158

)

Unrealized gain (loss) on available-for-sale securities

(31,296

)

51,419

(97,674

)

168,487

Other comprehensive gain (loss)

(37,144

)

51,542

(132,022

)

167,329

Comprehensive income (loss)

$

(5,712,278

)

$

(9,950,166

)

$

13,408,027

$

(31,308,326

)

Weighted-average number of common shares used in net income (loss) per share calculation:

Basic

41,564,840

41,974,518

39,738,685

41,924,252

Diluted

41,564,840

41,974,518

41,493,711

41,924,252

See accompanying notes.

3

ENDOCYTE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF
STOCKHOLDERS’ EQUITY

(unaudited)

Common Stock

Accumulated
Other

Shares

Amount

Additional
Paid-In Capital

Comprehensive
Income (Loss)

Retained
Deficit

Total

Balances December 31, 2014

41,784,692

$

41,785

$

373,571,500

$

(143,928

)

$

(168,465,239

)

$

205,004,118

Exercise of stock options

127,147

127

339,719

—

—

339,846

Stock-based compensation

29,190

29

5,163,915

—

—

5,163,944

Employee Stock Purchase Plan

34,127

34

169,918

—

—

169,952

Net loss

—

—

—

—

(31,475,655

)

(31,475,655

)

Unrealized loss on foreign exchange translation

—

—

—

(1,158

)

—

(1,158

)

Unrealized gain on securities

—

—

—

168,487

—

168,487

Balances September 30, 2015 (unaudited)

41,975,156

$

41,975

$

379,245,052

$

23,401

$

(199,940,894

)

$

179,369,534

See accompanying notes.

4

ENDOCYTE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS

Nine Months

Ended September 30,

2014

2015

(unaudited)

Operating activities

Net income (loss)

$

13,540,049

$

(31,475,655

)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Depreciation

630,176

666,174

Stock-based compensation

6,257,217

5,221,217

Loss on disposal of property and equipment

3,849

7,487

Accretion of bond premium

1,310,974

1,027,922

Change in operating assets and liabilities:

Receivables

2,222,804

827,022

Prepaid expenses and other assets

2,342,514

(448,548

)

Accounts payable

(3,997,669

)

(421,206

)

Accrued wages, benefits and other liabilities

(371,516

)

(1,233,116

)

Deferred revenue

(59,734,447

)

(37,500

)

Net cash used in operating activities

(37,796,049

)

(25,866,203

)

Investing activities

Purchases of property and equipment

(1,393,557

)

(255,623

)

Purchases of investments

(117,106,132

)

(51,747,015

)

Proceeds from sale and maturities of investments

49,170,755

62,899,199

Net cash provided by (used in) investing activities

(69,328,934

)

10,896,561

Financing activities

Proceeds from public offering

101,904,977

—

Stock repurchase

(3,814

)

(57,273

)

Proceeds from the exercise of stock options

792,507

339,846

Proceeds from stock purchases under employee stock purchase plan

191,078

169,952

Net cash provided by financing activities

102,884,748

452,525

Effect of exchange rate

(34,348

)

(1,158

)

Net decrease in cash and cash equivalents

(4,274,583

)

(14,518,275

)

Cash and cash equivalents at beginning of period

52,846,940

45,533,443

Cash and cash equivalents at end of period

$

48,572,357

$

31,015,168

See accompanying notes.

5

ENDOCYTE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of Business and Organization

Endocyte, Inc. (the “Company”)
is a biopharmaceutical company developing targeted therapies for the treatment of cancer and inflammatory diseases. The Company
uses its proprietary technology to create novel small molecule drug conjugates (“SMDCs”) and companion imaging agents.
The SMDCs actively target receptors that are over-expressed on diseased cells, relative to healthy cells. This targeted approach
is designed to enable the treatment of patients with a highly active drug at greater doses, delivered more frequently, and over
longer periods of time than would be possible with the untargeted drug alone. The Company is also developing companion imaging
agents for each of its SMDCs that are designed to identify the patients whose disease over-expresses the target of the therapy
and who are therefore most likely to benefit from treatment.

The Company has two wholly-owned subsidiaries,
Endocyte Europe B.V. and Endocyte Europe GmbH, which were formed to assist with the administration of applications with the European
Commission (“EC”) and commercial pre-launch activities in Europe. The applications were withdrawn in May 2014 and the
commercial pre-launch activities in Europe ceased. The Company is in the process of dissolving Endocyte Europe GmbH, which should
be completed in the fourth quarter of 2015. The Company plans to dissolve Endocyte Europe B.V. after the dissolution of Endocyte
Europe GmbH is completed.

2. Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated
financial statements include the accounts of Endocyte, Inc. and its subsidiaries and all intercompany amounts have been eliminated.
The condensed consolidated financial statements are prepared in conformity with U.S. generally accepted accounting principles (“GAAP”)
for interim financial information to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of
normal recurring accruals and revisions of estimates, considered necessary for a fair presentation of the accompanying condensed
consolidated financial statements have been included. Interim results for the three and nine months ended September 30, 2015 are
not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2015 or any other future
period. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated
financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31,
2014. Subsequent events have been evaluated through the date of issuance, which is the same as the date this Form 10-Q is filed
with the Securities and Exchange Commission.

Segment Information

Operating segments are defined as components
of an enterprise engaging in business activities for which discrete financial information is available and regularly reviewed by
the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company had performed
clinical trials globally and established a subsidiary in The Netherlands to assist in the administration of filing applications
in Europe and a subsidiary in Switzerland for commercial pre-launch activities in Europe. The applications filed in Europe were
withdrawn in May 2014 and the pre-launch activities in Europe ceased. The Company is in the process of dissolving Endocyte Europe
GmbH, which should be completed in the fourth quarter of 2015. The Company plans to dissolve Endocyte Europe B.V. after the dissolution
of Endocyte Europe GmbH is completed. All long-lived assets are held in the U.S. The Company views its operations and manages its
business in one operating segment.

Use of Estimates

The preparation of financial statements
in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual amounts may differ from those estimates.

Cash and Cash Equivalents

The Company considers cash and all highly
liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. Cash equivalents
consist primarily of money market instruments that are maintained by an investment manager.

6

Investments

Investments consist primarily of investments
in U.S. Treasuries, U.S. Government agency obligations and corporate debt securities, which could also include commercial paper,
that are maintained by an investment manager. U.S. government agency investments relate to investments in Fannie Mae, Freddie Mac
and Federal Home Loan Bank. Management determines the appropriate classification of marketable securities at the time of purchase
and reevaluates such classification as of each balance sheet date. Available-for-sale securities are carried at fair value, with
the unrealized gains and losses reported in other comprehensive income. Realized gains and losses and declines in value judged
to be other-than-temporary on available-for-
sale
securities are included in other income.
The Company considers and accounts for other-than-temporary impairments according to the Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) Topic 320,
Investments — Debt and Equity Securities
(“ASC 320”). The cost of securities sold is based on the specific-identification method. Discounts and premiums on
debt securities are amortized to interest income and expensed over the term of the security.

Revenue Recognition

The Company recognizes revenues from license
and collaboration agreements when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered,
the fee is fixed or determinable, and there is reasonable assurance that the related amounts are collectible in accordance with
ASC Topic 605,
Revenue Recognition
(“ASC 605”). The Company’s license and collaboration agreements may
contain multiple elements, including grants of licenses to intellectual property rights, agreement to provide research and development
services and other deliverables. The deliverables under such arrangements are evaluated under ASC Subtopic 605-25,
Multiple-Element
Arrangements
(“ASC 605-25”). Under ASC 605-25, each required deliverable is evaluated to determine whether it qualifies
as a separate unit of accounting based on whether the deliverable has “
stand
-alone value”
to the customer. The arrangement’s consideration that is fixed or determinable, excluding contingent milestone payments,
is then allocated to each separate unit of accounting based on the relative selling price of each deliverable. In general, the
consideration allocated to each unit of accounting is recognized as the related goods or services are delivered, limited to the
consideration that is not contingent upon future deliverables.

Upfront payments for licensing the Company's
intellectual property are evaluated to determine if the licensee can obtain stand-alone value from the license separate from the
value of the research and development services and other deliverables in the arrangement to be provided by the Company. If at the
inception of an arrangement the Company determines that the license does not have stand-alone value separate from the research
and development services or other
deliverables
, the license, services and other deliverables
are combined as one unit of account and upfront payments are recorded as deferred revenue on the balance sheet and are recognized
in a manner consistent with the final deliverable. Subsequent to the inception of an arrangement, the Company evaluates the remaining
deliverables for separation as items in the arrangement are delivered. When stand-alone value is identified, the related consideration
is recorded as revenue in the period in which the license or other intellectual property rights are delivered.

In those circumstances where research and
development services or other deliverables are combined with the license, and multiple services are being performed such that a
common output measure to determine a pattern of performance cannot be discerned, the Company recognizes amounts received on a straight
line basis over the performance period. Such amounts are recorded as collaboration revenue. Any subsequent reimbursement payments,
which are contingent upon the Company’s future research and development expenditures, will be recorded as collaboration
revenue
and will be recognized on a straight-line basis over the performance period using the cumulative catch up method. The costs associated
with these activities are reflected as a component of research and development expense in the statements of operations in the period
incurred. In the event of an early termination of a collaboration agreement, any deferred revenue is recognized in the period in
which all obligations of the Company under the agreement have been fulfilled.

Milestone payments under collaborative arrangements
are triggered either by the results of the Company’s research and development efforts, achievement of regulatory goals or
by specified sales results by a third-party collaborator. Milestones related to the Company’s development-based activities
may include initiation of various phases of clinical trials and applications and acceptance for product approvals by regulatory
agencies. Due to the uncertainty involved in meeting these development-based milestones, the determination is made at the inception
of the collaboration agreement whether the development-based milestones are considered to be substantive (i.e. not just achieved
through passage of time). In addition, the amounts of the payments assigned thereto are considered to be commensurate with the
enhancement of the value of the delivered intellectual property as a result of the Company’s performance. Because the Company’s
involvement is necessary to the achievement of development-based milestones, the Company would account for development-based milestones
as revenue upon achievement of the substantive milestone events. Milestones related to sales-based activities may be triggered
upon events such
as
first commercial sale of a product or when sales first achieve a defined
level. Since these sales-based milestones would be achieved after the completion of the Company’s development activities,
the Company would account for the sales-based milestones in the same manner as royalties, with revenue recognized upon achievement
of the milestone. Royalties based on reported sales of licensed products will be recognized based on contract terms when reported
sales are reliably measurable and collectability is reasonably assured. To date, none of the Company's products have been approved
and therefore the Company has not earned any royalty revenue from product sales. In territories where the Company and a collaborator
may share profit, the revenue would be recorded in the period earned.

The Company often is required to make estimates
regarding drug development and commercialization timelines for compounds being developed pursuant to a collaboration agreement.
Because the drug development process is lengthy and the Company’s
collaboration
agreements
typically cover activities over several years, this approach often results in the deferral of significant amounts of revenue into
future periods. In addition, because of the many risks and
uncertainties
associated with the
development
of
drug candidates, the Company’s estimates regarding the period of performance
may change in the future. Any change in the Company’s estimates or a termination of the arrangement could result in substantial
changes to the period over which the revenues are recognized.

7

Research and Development Expenses

Research and development expenses represent
costs associated with the ongoing development of SMDCs and companion imaging agents and include salaries, supplies, depreciation,
and expenses for clinical trials. The Company records accruals for
clinical
trial expenses
based on the estimated amount of work completed.
The
Company monitors patient enrollment levels
and related activities to the extent possible through internal reviews, correspondence, and discussions with research organizations.
In the event that a clinical trial is terminated early, the Company records, in the period of termination, an accrual for the estimated
remaining costs to complete the trial.

Upfront payments made in connection with
business collaborations and research and development arrangements are evaluated under ASC Subtopic 730-20,
Research and Development
Arrangements
. Upfront payments made in connection with
business
development collaborations
are expensed as research and development costs, as the assets acquired do not have alternative future use. Amounts related to future
research and development are capitalized as prepaid research and development and are expensed over the service
period
based upon the level of services provided. As of September 30, 2015, the Company had approximately $0.5 million of capitalized
research and development costs included in prepaid expenses and other noncurrent assets.

Stock-Based Compensation

The Company accounts for its stock-based
compensation awards pursuant to ASC Topic 718,
Compensation — Stock Compensation
(“ASC 718”),
which requires the recognition of the fair value of stock-based compensation in net income. Stock-based compensation consists of
stock options, which are granted at exercise prices at or above the fair market value of the Company’s common stock on the
dates of grant, service-based restricted stock units (“RSUs”), performance-based RSUs (“PRSUs”), and shares
available for purchase under the Company’s 2010 Employee Stock Purchase Plan (“ESPP”). For PRSUs issued by the
Company, stock-based compensation expense would be recognized if and when the Company determines that it is probable that the performance
conditions will be achieved. For RSUs issued by the Company, stock-based compensation expense is recognized ratably over the service
period. The Company recognizes compensation cost based on the grant-date fair value estimated in accordance with the provisions
of ASC 718.

Net Income (Loss) Per Share

Basic net income (loss) per share is calculated
by dividing the net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding
during the period, without consideration for common stock equivalents. Diluted net income (loss) per share is computed by dividing
the net income (loss) attributable to common stockholders by the weighted-average number of common share equivalents outstanding
for the period determined using the treasury-stock method and the if-converted method. For purposes of this calculation, common
stock options, warrants, PRSUs, RSUs and shares to be purchased under the ESPP are considered to be common stock equivalents and
are only included in the calculation of diluted net income (loss) per share when their effect is dilutive.

Common stock equivalents

As of September 30, 2014 and 2015, the following
number of potential common stock equivalents was outstanding:

As of September 30,

2014

2015

Outstanding common stock options

5,529,255

5,693,156

Outstanding warrants

34,647

34,647

Outstanding PRSUs

246,386

216,008

Outstanding RSUs

170,439

352,949

Shares to be purchased under the ESPP

14,337

23,352

Total

5,995,064

6,320,112

For the three and nine months ended September
30, 2015 and the three months ended September 30, 2014, the common stock equivalents were excluded from the determination of diluted
net loss per share due to their anti-dilutive effect on earnings.

The following weighted-average outstanding
common stock options, warrants, RSUs and shares to be purchased under the ESPP were added to basic weighted-average common shares
outstanding for the nine months ended September 30, 2014 to calculate diluted weighted-average shares outstanding because of their
dilutive effect:

8

Nine Months
Ended September 30,

2014

Outstanding common stock options

1,726,537

Outstanding warrants

8,694

Outstanding RSUs

12,293

Shares to be purchased under the ESPP

7,502

Total

1,755,026

3. New Accounting Pronouncements

Recently Issued Accounting Standards

In November 2014, the FASB issued Accounting
Standards Update (“ASU”) 2014-16,
Determining Whether the Host Contract in a Hybrid Financial Instrument Issued
in the Form of a Share Is More Akin to Debt or to Equity
, an update to ASC Topic 815, Derivatives and Hedging. This amendment
provides clarification regarding the “whole instrument approach” in determining the nature of a host contract in a
hybrid financial instrument issued in the form of a share. Under this new standard, issuers and investors are required to consider
all of a hybrid instrument’s stated and implied substantive terms and features. This update will be effective for the Company
beginning January 1, 2016, unless it elects early adoption. The Company does not expect the adoption of this guidance to have a
material impact on its consolidated financial statements.

In August 2014, the FASB issued ASU 2014-15
(Subtopic 205-40),
Presentation of Financial Statements — Going Concern
, which requires management to evaluate
whether there is substantial doubt about an entity’s ability to continue as a going concern and provide related footnote
disclosures. The guidance is effective for annual and interim reporting periods beginning on or after December 15, 2016. Early
adoption is permitted for financial statements that have not been previously issued. The standard allows for either a full retrospective
or modified retrospective transition method. This update will be effective for the Company beginning January 1, 2017, unless it
elects early adoption. The Company is currently evaluating the impact, if any, the adoption of this guidance will have on its consolidated
financial statements.

In May 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers
(Topic 606), to clarify the principles used to recognize revenue for all entities.
Under ASU 2014-09, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount
that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In order to
do so, an entity would follow the five-step process for in-scope transactions: 1) identify the contract with a customer, 2) identify
the separate performance obligations in the contract, 3) determine the transaction price, 4) allocate the transaction price to
the separate performance obligations in the contract, and 5) recognize revenue when (or as) the entity satisfies a performance
obligation. In August 2015, the FASB issued ASU No. 2015-14, which defers the effective date of ASU 2014-09 by one year. Therefore,
ASU 2014-09 will become effective for the Company for interim and annual reporting periods beginning after December 15, 2017. Early
adoption is permitted, but not any earlier than the original effective date of December 15, 2016. An entity can apply the new revenue
standard retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying
the standard recognized at the date of initial application in retained earnings. The Company is currently evaluating the impact,
if any, the adoption of this guidance will have on its consolidated financial statements.

4. Other Comprehensive Income (Loss)

The following tables summarize the accumulated
balances related to each component of other comprehensive income (loss) for the three months ended September 30, 2014 and 2015:

9

Foreign Currency
Translation Losses

Unrealized Net
Gains (Losses)
on Securities

Accumulated
Other
Comprehensive
Income (Loss)

Balance at June 30, 2014

$

(40,316

)

$

2,129

$

(38,187

)

Unrealized loss

(5,848

)

(31,904

)

(37,752

)

Net amount reclassified to net loss

—

608

608

Other comprehensive loss

(5,848

)

(31,296

)

(37,144

)

Balance at September 30, 2014

$

(46,164

)

$

(29,167

)

$

(75,331

)

Foreign Currency
Translation Gains
(Losses)

Unrealized Net
Gains
on Securities

Accumulated
Other
Comprehensive
Income (Loss)

Balance at June 30, 2015

$

(51,873

)

$

23,732

$

(28,141

)

Unrealized gain

123

51,419

51,542

Net amount reclassified to net loss

—

—

—

Other comprehensive income

123

51,419

51,542

Balance at September 30, 2015

$

(51,750

)

$

75,151

$

23,401

The following tables summarize the accumulated
balances related to each component of other comprehensive income (loss) for the nine months ended September 30, 2014 and 2015:

Foreign Currency
Translation Losses

Unrealized Net
Gains (Losses)
on Securities

Accumulated Other
Comprehensive
Income (Loss)

Balance at December 31, 2013

$

(11,816

)

$

68,507

$

56,691

Unrealized loss

(34,348

)

(98,282

)

(132,630

)

Net amount reclassified to net income

—

608

608

Other comprehensive loss

(34,348

)

(97,674

)

(132,022

)

Balance at September 30, 2014

$

(46,164

)

$

(29,167

)

$

(75,331

)

Foreign Currency
Translation Losses

Unrealized Net
Gains (Losses) on
Securities

Accumulated Other
Comprehensive
Income (Losses)

Balance at December 31, 2014

$

(50,592

)

$

(93,336

)

$

(143,928

)

Unrealized gain (loss)

(1,158

)

173,391

172,233

Net amount reclassified to net loss

—

(4,904

)

(4,904

)

Other comprehensive income (loss)

(1,158

)

168,487

167,329

Balance at September 30, 2015

$

(51,750

)

$

75,151

$

23,401

The assets and liabilities of foreign operations
are translated into U.S. dollars using the current exchange rate. For those operations, changes in exchange rates generally do
not affect cash flows, which results in translation adjustments being made in stockholders’ equity rather than to net income
(loss).

5. Investments

The Company applies the fair value measurement
and disclosure provisions of ASC Topic 820,
Fair Value Measurements and Disclosures
(“ASC 820”). ASC 820, which
defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements.
Investments consist primarily of investments with original maturities greater than three months, but no longer than 24 months when
purchased.

ASC 820 establishes a three-level valuation
hierarchy for fair value measurements. These valuation techniques are based upon the transparency of inputs (observable and unobservable)
to the valuation of an asset or liability as of the measurement date. Observable inputs reflect market data obtained from independent
sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs create the following
fair value hierarchy:

10

Level 1
— Valuation is
based on quoted prices for identical assets or liabilities in active markets.

Level 2
— Valuation is
based on quoted prices for similar assets or liabilities in active markets, or other inputs that are observable for the asset or
liability, either directly or indirectly, for the full term of the financial instrument.

Level 3
— Valuation is
based upon other unobservable inputs that are significant to the fair value measurement.

The fair value of the Company’s fixed
income securities is based on a market approach using quoted market values.

The following table summarizes the fair
value of cash and cash equivalents and investments as of December 31, 2014:

Description

Cost

Level 1

Level 2

Fair Value
(Carrying
Value)

Cash

Cash

$

6,068,579

$

6,068,579

$

—

$

6,068,579

Cash equivalents

Money market funds

39,464,864

39,464,864

—

39,464,864

Cash and cash equivalents

$

45,533,443

$

45,533,443

$

—

$

45,533,443

Short-term investments (due within 1 year)

U.S. government agency obligations

$

38,934,684

$

38,928,806

$

—

$

38,928,806

Corporate obligations

40,659,036

—

40,607,405

40,607,405

Total short-term investments

$

79,593,720

$

38,928,806

$

40,607,405

$

79,536,211

Long-term investments (due after 1 year through 2 years)

U.S. government treasury obligations

$

38,626,279

$

38,623,495

$

—

$

38,623,495

U.S. government agency obligations

35,223,450

35,203,355

—

35,203,355

Corporate obligations

7,947,275

—

7,934,327

7,934,327

Total long-term investments

$

81,797,004

$

73,826,850

$

7,934,327

$

81,761,177

The following table summarizes the fair
value of cash and cash equivalents and investments as of September 30, 2015:

Description

Cost

Level 1

Level 2

Fair Value
(Carrying
Value)

Cash

Cash

$

2,781,264

$

2,781,264

$

—

$

2,781,264

Cash equivalents

Money market funds

28,233,904

28,233,904

—

28,233,904

Cash and cash equivalents

$

31,015,168

$

31,015,168

$

—

$

31,015,168

Short-term investments (due within 1 year)

U.S. government treasury obligations

$

43,076,116

$

43,119,700

$

—

$

43,119,700

U.S. government agency obligations

52,635,082

52,654,995

—

52,654,995

Corporate obligations

45,336,121

—

45,337,462

45,337,462

Total short-term investments

$

141,047,319

$

95,774,695

$

45,337,462

$

141,112,157

Long-term investments (due after 1 year through 2 years)

U.S. government agency obligations

8,163,297

8,173,610

—

8,173,610

Total long-term investments

$

8,163,297

$

8,173,610

$

—

$

8,173,610

All securities held at December 31, 2014
and September 30, 2015, were classified as available-for-sale as defined by ASC 320.

Total unrealized gross gains were $18,858
and $84,288 as of December 31, 2014 and September 30, 2015, respectively. Total unrealized gross losses were $112,194 and $9,137
as of December 31, 2014 and September 30, 2015, respectively. The Company does not consider any of the unrealized losses to be
other-than-temporary impairments because the Company has the intent and ability to hold investments until they recover in value.
Total realized gross gains were $608 and $1,667 for the nine months ended September 30, 2014 and 2015, respectively. There were
no total realized gross losses for the nine months ended September 30, 2014 and 2015.

11

6. Collaborations

Merck Collaboration Agreement

In April 2012, the Company entered into
a worldwide collaboration agreement with Merck Sharp & Dohme Research GmbH, a subsidiary of Merck & Co, Inc. (“Merck”),
regarding the development and commercialization of vintafolide, which agreement was terminated by Merck effective September 15,
2014. As a result of the termination of the collaboration with Merck, the Company is no longer eligible for additional milestone
payments from Merck. In addition, all obligations of the Company under the agreement have been fulfilled and the Company is not
required to perform any additional services to Merck. Pursuant to the collaboration agreement, the Company received a $120.0 million
non-refundable upfront payment and a $5.0 million milestone payment in 2012. Under the collaboration agreement, the Company was
responsible for the majority of funding and completion of the Phase 3 PROCEED clinical trial of vintafolide for the treatment of
patients with platinum-resistant ovarian cancer (“PROC”), which was terminated in May 2014. The Company was responsible
for the execution of the Phase 2b TARGET trial of vintafolide for the treatment of second line non-small cell lung cancer, which
is now complete. Merck was responsible for the costs of the TARGET trial through September 15, 2014.

For revenue recognition purposes, the Company
viewed the collaboration with Merck as a multiple element arrangement. Multiple element arrangements are analyzed to determine
whether the various performance obligations, or elements, can be separated or whether they must be accounted for as a single unit
of accounting. The Company evaluated whether the delivered elements under the arrangement had value on a stand-alone basis and
whether objective and reliable evidence of fair value of the undelivered element existed. Deliverables that did not meet these
criteria were not evaluated separately for the purpose of revenue recognition. For a single unit of accounting, payments received
were recognized in a manner consistent with the final deliverable. The Company determined that the deliverables related to the
collaboration with Merck, including the licenses granted to Merck, as well as the Company performance obligations to provide various
research and development services, would be accounted for as a single unit of account. This determination was made because the
successful development of the therapeutic drug, vintafolide, is dependent on the companion diagnostic, etarfolatide, to select
patients who are most likely to receive the most benefit from vintafolide. Given the nature of the combined benefit of the companion
diagnostic and the therapeutic drug, the research and development services provided by the Company were essential to the overall
arrangement as the Company had significant knowledge and technical know-how that was important to realizing the value of the licenses
granted. Subsequent to the inception of the Merck arrangement, the Company evaluated the remaining deliverables for separation
as items in the arrangement were delivered.

The Company recognized the non-refundable
$120.0 million upfront payment, the $5.0 million milestone payment and funding from the research and development services on a
straight-line basis over the estimated performance period, which started at the date of execution of the agreement. Based on the
termination of the PROCEED trial and receiving the notice of termination of the collaboration agreement in 2014, the Company concluded
that all of its obligations under the agreement had been fulfilled and the Company was not required to perform any additional services
to Merck, and as a result, the entire balance of deferred revenue related to the collaboration agreement was recognized in 2014.
The Company recognized approximately $3.9 million and $70.3 million of revenue related to the Merck collaboration during the three
and nine months ended September 30, 2014, respectively. Though accounted for as a single unit of account for presentation purposes,
the Company made an allocation of revenue recognized as collaboration revenue between the license and the services. This allocation
was based upon the relative selling price of each deliverable. For the three and nine months ended September 30, 2014, license
revenue was approximately $0 and $52.7 million, respectively, while research and development services revenue was approximately
$3.9 million and $17.6 million, respectively, of the collaboration revenue.

NMP License and Commercialization Agreement

In August 2013, the Company entered into
a license and commercialization agreement with Nihon Medi-Physic Co., LTD. (“NMP”) that grants NMP the right to develop
and commercialize etarfolatide in Japan for use in connection with vintafolide in Japan. The Company received a $1.0 million non-refundable
upfront payment, is eligible for up to $4.5 million based on the successful achievement of regulatory goals for etarfolatide in
five different cancer indications and is eligible to receive double-digit percentage royalties on sales of etarfolatide in Japan.

For revenue recognition purposes, the Company
viewed the agreement with NMP as a multiple element arrangement. Multiple element arrangements are analyzed to determine whether
the various performance obligations, or elements, can be separated or whether they must be accounted for as a single unit of accounting.
The Company has identified the deliverables related to the collaboration with NMP, which include the license granted to NMP, as
well as the obligation to provide preclinical and clinical supply of etarfolatide, to provide rights to NMP if a product is developed
that replaces etarfolatide, the obligation for the Company to provide clinical data to NMP during the contract period and the coordination
of development and commercialization efforts between the Company for vintafolide and NMP for etarfolatide in Japan. The Company’s
deliverables will be accounted for as a single unit of account, therefore the non-refundable upfront payment is being recognized
on a straight-line basis over the performance period. This determination was made because the successful development of etarfolatide
in Japan requires the ongoing participation by the Company, including the development of the related therapeutic drug, vintafolide.
The performance period over which the revenue will be recognized continues from the date of execution of the agreement through
the end of 2033, the estimated termination date of the contract which is when the Company’s performance obligations will
be completed. Any significant changes in the timing of the performance period could result in a change in the revenue recognition
period. The Company had deferred revenue related to the agreement of approximately $0.9 million at September 30, 2015. Subsequent
to the inception of the NMP arrangement, the Company evaluates the remaining deliverables for separation as items in the arrangement
are delivered.

12

The arrangement with NMP includes milestone
payments of up to approximately $4.5 million and the milestones are based on the commencement of clinical trials in Japan for specific
and non-specific indications and filing for approval in Japan for specific and non-specific indications. The Company evaluated
each of these milestone payments and believes that all of the milestones are substantive as there is substantial performance risk
that must occur in order for them to be met because the Company must complete additional clinical trials which show a positive
outcome or receive approval from a regulatory authority and would be commensurate with the enhancement of value of the underlying
intellectual property. To date, the products have not been approved in Japan and no revenue has been recognized related to the
regulatory milestones or royalties.

NMP has the right to terminate the collaboration
agreement on 90 days notice prior to first commercial sale in Japan and six months notice after the first commercial sale in Japan.
NMP also has the right to terminate the agreement on six months notice if the Company fails to launch vintafolide after receiving
regulatory approval in Japan. NMP and the Company each have the right to terminate the agreement due to the material breach or
insolvency of the other party. Upon termination of the agreement depending on the circumstances, the parties have varying rights
and obligations with respect to licensing and related regulatory materials and data.

7. Stockholders’ Equity

Public Offering

On April 2, 2014, the Company completed
a public offering of 5,175,000 shares of its common stock in a public offering. Proceeds, net of underwriting discounts, commissions
and other transaction costs, were $101.9 million.

Stock-Based Compensation Plans

The Company has had stock-based compensation
plans since 1997. The awards made under the plans adopted in 1997 and 2007 consisted of stock options. The 2010 Equity Incentive
Plan (the “2010 Plan”), which is the only plan under which awards may currently be made, authorizes awards in the form
of stock options, stock appreciation rights, restricted stock, PRSUs, performance units, performance shares, and RSUs. Awards under
the 2010 Plan may be made to employees, directors and certain consultants as determined by the compensation committee of the board
of directors. There were 8,071,563 and 9,742,563 shares of common stock authorized and reserved under these plans at December 31,
2014 and September 30, 2015, respectively. The Company also has had an active ESPP in place since January 2014. Information regarding
the ESPP is set forth below.

Stock Options

Under the various plans, employees have
been granted incentive stock options, while directors and consultants have been granted non-qualified options. The plans allow
the holder of an option to purchase common stock at the exercise price, which was at or above the fair value of the Company’s
common stock on the date of grant.

Generally, options granted under the 1997
and 2007 plans in connection with an employee’s commencement of employment vest over a four-year period with one-half of
the shares subject to the grant vesting after two years of employment and remaining options vesting monthly over the remainder
of the four-year period. Options granted under the 1997 and 2007 plans for performance or promotions vested monthly over a four-year
period. Generally, options granted under the 2010 Plan vest annually over a three-year or four-year period. Unexercised stock options
terminate on the tenth anniversary date after the date of grant. The Company recognizes stock-based compensation expense over the
requisite service period of the individual grantees, which generally equals the vesting period. The Company utilizes a Black-Scholes
option-pricing model to estimate the value of stock options. The Black-Scholes model allows the use of a range of assumptions related
to volatility, risk-free interest rate, employee exercise behavior and dividend yield. Expected volatilities used in the model
beginning in 2015 are based on historical volatility of the Company’s stock prices. Expected volatilities used in the model
prior to 2015 were based on a combination of peer volatility and Company volatility.

Due to insufficient history as a public
company, the Company is using the “simplified” method for “plain vanilla” options to estimate the expected
term of the stock options grants. Under this approach, the weighted-average expected life is presumed to be the average of the
vesting term and the contractual term of the option. The risk-free interest rate assumption is derived from the weighted-average
yield of a U.S. Treasury security with the same term as the expected life of the options, and the dividend yield assumption is
based on historical experience and the Company’s estimate of future dividend yields.

The weighted-average value of the individual
options granted during the three and nine months ended September 30, 2014 and 2015 were determined using the following assumptions:

13

Three Months
Ended
September 30,

Nine Months
Ended
September 30,

2014

2015

2014

2015

Expected volatility

106.0

%

103.0

%

102.8

%

106.5

%

Risk-free interest rate

1.94

%

1.77

%

1.98

%

1.55

%

Weighted-average expected life (in years)

6.3

6.3

6.7

6.4

Dividend yield

0.00

%

0.00

%

0.00

%

0.00

%

The Company’s stock option activity
and related information are summarized as follows:

Options

Weighted-Average
Exercise Price

Weighted-Average
Remaining
Contractual Term (In
Years)

Aggregate
Intrinsic
Value

Outstanding at January 1, 2015

5,096,674

$

7.29

Granted during period

851,672

5.10

Exercised during period

(114,636

)

2.60

Expired during period

(13,443

)

11.68

Forfeited during period

(177,309

)

8.11

Outstanding at March 31, 2015

5,642,958

$

7.02

7.12

$

6,705,385

Exercisable at March 31, 2015

3,212,082

$

6.37

5.96

$

5,168,069

Outstanding at April 1, 2015

5,642,958

$

7.02

Granted during period

177,750

5.92

Exercised during period

(10,619

)

3.26

Expired during period

(120,670

)

11.07

Forfeited during period

(31,218

)

7.45

Outstanding at June 30, 2015

5,658,201

$

6.90

6.96

$

3,765,161

Exercisable at June 30, 2015

3,376,445

$

6.39

5.82

$

3,336,694

Outstanding at July 1, 2015

5,658,201

$

6.90

Granted during period

68,850

5.16

Exercised during period

(1,892

)

3.55

Expired during period

(10,200

)

9.54

Forfeited during period

(21,803

)

8.75

Outstanding at September 30, 2015

5,693,156

$

6.87

6.74

$

4,006,765

Exercisable at September 30, 2015

3,392,787

$

6.43

5.58

$

3,483,355

As of September 30, 2015, the total remaining
unrecognized compensation cost, net of forfeitures, related to stock options granted was $9.9 million, which is expected to be
recognized over a weighted average period of approximately 1.5 years.

Restricted Stock Units

In May 2011, the Company adopted and granted
awards under a performance-based RSU program (the “2011 PRSU Program”) under the 2010 Plan. Each unit represents an
amount equal to one share of the Company’s common stock. The PRSUs will be earned, in whole or in part, based on performance
and service conditions. The performance condition is based upon whether the Company receives regulatory approval to sell a therapeutic
product, and the awards include a target number of PRSUs that will vest upon a First Commercial Approval, and a maximum number
of PRSUs that will vest upon a Second Commercial Approval. Any earned PRSUs will vest fifty percent based on the performance condition
of commercial approval and fifty percent one year thereafter to fulfill the service condition, which requires the employee to remain
employed by the Company.

As of September 30, 2015, the Company had
216,008 PRSU awards outstanding. The unrecorded stock compensation expense is based on number of units granted, less estimated
forfeitures based on the Company’s historical forfeiture rate of 6.49%, and the closing market price of the Company’s
common stock at the grant date. As of September 30, 2015, the performance condition of obtaining regulatory approval had not been
achieved, therefore, no vesting had occurred. The awards are being accounted for under ASC 718, and compensation expense is to
be recorded if the Company determines that it is probable that the performance conditions will be achieved. As of September 30,
2015, it was not probable that the performance conditions will be achieved, therefore, no compensation expense related to the PRSUs
was recorded for the three and nine months ended September 30, 2015. Based on the performance conditions and the stage of development
of our potential products, we have concluded that the performance conditions will not be achieved before the performance deadline
of May 26, 2016 and, as a result, we do not expect to recognize any stock-based compensation expense related to the PRSUs.

14

The RSUs are service-based awards that will
vest and be paid, in the form of one share of the Company’s common stock for each RSU, generally in three or four equal annual
installments beginning on the first anniversary of the date of grant of the RSU. As of September 30, 2015, the total remaining
unrecognized compensation cost, net of forfeitures, related to RSUs was $1.8 million, which is expected to be recognized over a
weighted average period of approximately 1.6 years.

The following table sets forth the number
of RSUs that were granted, vested and forfeited in the period indicated:

Restricted
Stock
Units

Weighted-Average
Grant
Date Fair Value

Outstanding at January 1, 2015

161,439

$

11.11

Granted during period

222,976

5.10

Vested during period

(40,333

)

11.11

Forfeited during period

(17,730

)

8.74

Outstanding at March 31, 2015

326,352

$

7.20

Outstanding at April 1, 2015

326,352

$

7.20

Granted during period

18,000

6.02

Vested during period

—

—

Forfeited during period

(7,090

)

7.04

Outstanding at June 30, 2015

337,262

$

7.14

Outstanding at July 1, 2015

337,262

$

7.14

Granted during period

20,000

5.16

Vested during period

—

—

Forfeited during period

(4,313

)

7.38

Outstanding at September 30, 2015

352,949

$

6.73

Employee Stock Purchase Plan

Effective January 1, 2014, the Company implemented
the ESPP. At January 1, 2015, 986,530 common shares were available for issuance under the ESPP. Shares may be issued under the
ESPP twice a year. In the year ended December 31, 2014, plan participants purchased 53,250 shares of common stock under the ESPP
at an average purchase price of $5.62 per share. In the nine months ended September 30, 2015, plan participants purchased 34,127
shares of common stock under the ESPP at an average purchase price of $4.98 per share. There were no purchases in the three months
ended September 30, 2015. At September 30, 2015, 952,403 shares were available for issuance under the ESPP.

8. Income Taxes

The Company accounts for income taxes under
the liability method in accordance with the provisions of ASC Topic 740,
Income Taxes
. The Company recognizes future tax
benefits, such as net operating losses, to the extent those benefits are expected to be realized in future periods. Due to uncertainty
surrounding the realization of its deferred tax assets, the Company has recorded a valuation allowance against its net deferred
tax assets. The Company experienced a change in ownership as defined under Section 382 of the U.S. Internal Revenue Code in
August 2011. As a result, the future use of its net operating losses and credit equivalents is currently limited to approximately
$172.2 million for 2015, $29.7 million for 2016 and $16.8 million for 2017. Any available but unused amounts will become available
for use in all successive years.

9. Commitments and Contingencies

On June 24, 2014, a complaint in a securities
class action lawsuit was filed against the Company and one of its officers and directors in the United States District Court for
the Southern District of Indiana under the following caption:
Tony Nguyen, on Behalf of Himself and All Others Similarly Situated
v. Endocyte, Inc. and P. Ron Ellis
(the “Nguyen Litigation”). On July 13, 2014, a nearly identical complaint in
a securities class action lawsuit was filed against the Company and one of its officers and directors in the United States District
Court for the Southern District of Indiana under the following caption:
Vivian Oh Revocable Trust, Individually and on Behalf
of All Others
Similarly
Situated v. Endocyte, Inc. and P. Ron Ellis
(the “Oh Litigation”). On September
22, 2014, the court named a lead plaintiff (“Lead Plaintiff”) and consolidated the Nguyen Litigation and the Oh Litigation
under the following caption:
Gopichand Vallabhaneni v. Endocyte, Inc. and P. Ron Ellis
(the “Vallabhaneni Litigation”)
.
On November 17, 2014, Lead Plaintiff filed a consolidated amended securities class action complaint (the “Amended Complaint”)
against the Company, P. Ron Ellis, Beth Taylor, Michael A. Sherman, John C. Aplin, Philip S. Low, Keith A. Brauer, Ann F. Hanham,
Marc Kozin, Peter D. Meldrum, Fred A. Middleton, Lesley Russell (the “Individual Defendants” and collectively with
the Company, the “Endocyte Defendants”), and Credit Suisse Securities (USA) LLC and Citigroup Global Markets Inc. (the
“Underwriter Defendants”). Lead Plaintiff alleged, among other things, that the Endocyte Defendants made false and
misleading statements relating to the efficacy of vintafolide and violated Sections 10(b) and 20(a) of the Exchange Act. The putative
class related to these allegations consists of all persons who purchased or otherwise acquired the Company’s securities between
March 21, 2014 and May 2, 2014. Lead Plaintiff also alleged in the Amended Complaint that the Endocyte Defendants and the Underwriter
Defendants violated Sections 11 and 15 of the Securities Act of 1933, as amended (the “Securities Act”), by, among
other things, making or allowing the Company to make false and misleading statements regarding positive opinions about vintafolide
issued by the European Medicines Agency’s Committee for Medicinal Products for Human Use in the Company’s Registration
Statement on Form S-3 filed on March 25, 2014, preliminary prospectus filed on March 26, 2014, and final prospectus filed on March
28, 2014. The putative class related to these allegations consists of all those who purchased or otherwise acquired the Company’s
securities pursuant to or traceable to the Company’s April 2, 2014 public offering.

15

Lead Plaintiff seeks the designation of
the Vallabhaneni Litigation as a class action, an award of unspecified damages, interest, costs, expert fees and attorneys’
fees, and equitable/injunctive relief or other relief as the court may deem just and proper. Pursuant to a December 9, 2014 order,
all Defendants filed a motion to dismiss on March 6, 2015. Lead Plaintiff filed a motion in opposition on April 6, 2015 to which
Defendants replied on April 20, 2015. Discovery in this matter is stayed pursuant to provisions of the Private Securities Litigation
Reform Act (“PSLRA”) pending resolution of that motion to dismiss. The Company believes that this lawsuit is without
merit and has defended, and intends to continue to defend, itself vigorously against the allegations made in the Amended Complaint.

On September 23, 2014, a complaint in a
shareholder derivative lawsuit was filed against all of the Company’s current directors in the United States District Court
for the Southern District of Indiana under the following caption:
William Moore, Derivatively on Behalf of Nominal Defendant
Endocyte, Inc. v. John C. Aplin, et al.
(the “Moore Litigation”). The Company was named as a nominal defendant
in the case. The complaint alleged, among other things, that the defendants violated state law, including through breaches of fiduciary
duties, gross mismanagement, waste of corporate assets and unjust enrichment, in regard to false and misleading statements and
material omissions made concerning the efficacy of vintafolide, causing substantial monetary losses to the Company and other damages,
including irreparable damages to the Company’s reputation and goodwill. The complaint sought: unspecified damages from each
of the defendants, jointly and severally, together with interest thereon; an order directing that actions be taken to reform and
improve the Company’s corporate governance and internal procedures to comply with applicable laws and to protect the Company’s
shareholders from a repeat of the alleged damaging events; an award of unspecified exemplary damages; restitution; costs and disbursements,
including reasonable attorneys’ and experts’ fees, costs and expenses; and such other and further equitable relief
as the court may deem just and proper.

On October 31, 2014, a complaint in a shareholder
derivative lawsuit nearly identical to the Moore Litigation was filed against all of the Company’s current directors in the
United States District Court for the Southern District of Indiana under the following caption:
Victor Veloso, Derivatively on
Behalf of Endocyte, Inc. v. John C. Aplin, et al.
(the “Veloso Litigation”). The Company was named as a nominal
defendant in the case. The complaint alleged, among other things, that the defendants violated and breached their fiduciary duties
of care, loyalty, reasonable inquiry and good faith by causing the Company to issue false and misleading statements concerning
its financial condition, resulting in significant damages, not only monetarily, but also to its corporate image and goodwill, including
costs associated with defending securities lawsuits, severe damage to its share price, resulting in an increased cost of capital,
the waste of corporate assets and reputational harm. The complaint sought: unspecified damages from all of the defendants; an order
directing that the Company take all necessary actions to reform and improve its corporate governance and internal procedures, to
comply with existing governance obligations and all applicable laws and to protect the Company and its investors from a recurrence
of the alleged damaging events; costs and disbursements, including reasonable attorneys’ fees, accountants’ and experts’
fees, costs and expenses; and such other and further relief as the court deems just and proper.

On December 31, 2014, the court appointed
co-lead counsel and consolidated the Moore Litigation with the Veloso Litigation under the following caption:
In re Endocyte,
Inc. Derivative Litigation
(the “Endocyte Derivative Litigation”). An amended complaint was filed on February 28,
2015 which contains allegations and requests for relief that are substantially the same as the complaints in the Moore Litigation
and the Veloso Litigation. Although this lawsuit is brought nominally on behalf of the Company, the Company expects to incur defense
costs and other expenses in connection with the lawsuit. Discovery and other proceedings in this matter are currently stayed pursuant
to agreement of the parties pending resolution of the March 6, 2015 motion to dismiss in the Vallabhaneni Litigation.

On November 6, 2014, a complaint was filed
against the Company, two of its executive officers, Merck and one of Merck’s officers in the Superior Court of Tippecanoe
County, Indiana under the following caption:
Mohamad Hage and Jamele Hage v. Endocyte, Inc., P. Ron Ellis, Mike A. Sherman,
Eric Rubin and Merck & Co., Inc.
(the “Hage Litigation”). The complaint alleged, among other things, that the
defendants: made false and misleading statements about the efficacy of vintafolide and the likelihood that it would be approved
for sale; employed devices, schemes and artifices to defraud; made untrue statements of material facts and omitted to state material
facts necessary in order to make the statements made about the Company and its business operations not misleading; and breached
fiduciary duties owed to the plaintiffs. The complaint alleged that as a result of the alleged fraudulent misrepresentations, non-disclosures
and schemes of the defendants, plaintiffs have suffered pecuniary losses. The plaintiffs seek an award of unspecified actual, compensatory,
consequential, incidental and punitive damages, reasonable costs, expert fees and attorneys’ fees, and such equitable/injunctive
or other relief as the court may deem just and proper. The Company believes that it may have an obligation to indemnify Merck and
its named officer in connection with the Hage Litigation, depending on certain factors. On January 9, 2015, the defendants filed
a Motion to Stay the Proceeding or in the Alternative to Stay Discovery (the “Motion to Stay”). A hearing on the Motion
to Stay was held on February 19, 2015. On March 20, 2015, the court ruled to stay the case pending final resolution of the Vallabhaneni
case. The plaintiffs sought an interlocutory appeal to which the Company opposed. On May 22, 2015, the court denied the interlocutory
appeal motion. After a status conference hearing on August 13, 2015, where plaintiffs sought to lift the stay, the court, on September
20, 2015, continued the stay in accordance with its March 20, 2015 ruling.
The Company believes
that this lawsuit is without merit and has defended, and intends to continue to defend, itself vigorously against the allegations
made in the complaint.

The Company also has certain obligations
to indemnify, and advance expenses to, its directors and officers in connection with various actions, suits and proceedings.

16

10. Restructuring Costs

The Company terminated the PROCEED
trial in May 2014 after the interim futility analysis indicated that vintafolide did not demonstrate efficacy on the pre-specified
outcome of progression-free survival for the treatment of PROC. As a result, the Company ceased its pre-launch commercial activities
in Europe and implemented staff reductions in Europe and in the U.S. All employee and contract termination expenses were recorded
and paid in the year ended December 31, 2014. At September 30, 2015, the Company had a clinical trial accrual balance related to
the PROCEED trial termination of $0.2 million, which is expected to be fully paid by December 31, 2015.

The following table summarizes the restructuring
accruals for the three and nine months ended September 30, 2015:

PROCEED
Trial
Termination
Accrual

Balance, June 30, 2015

$

400,000

Charges for the three months ended September 30, 2015

—

Amounts paid in the three months ended September 30, 2015

(200,000

)

Balance, September 30, 2015

$

200,000

PROCEED
Trial
Termination
Accrual

Balance, December 31, 2014

$

1,300,000

Charges for the nine months ended September 30, 2015

250,000

Amounts paid in the nine months ended September 30, 2015

(1,350,000

)

Balance, September 30, 2015

$

200,000

17

Item 2.
Management’s Discussion and Analysis
of Financial Condition and Results of Operations

This quarterly report on Form 10-Q contains
certain statements that are forward-looking statements within the meaning of federal securities laws. When used in this report,
the words “may,” “will,” “should,” “could,” “would,” “anticipate,”
“estimate,” “expect,” “plan,” “believe,” “predict,” “potential,”
“project,” “target,” “forecast,” “intend” and similar expressions are intended
to identify forward-looking statements. Forward-looking statements are subject to risks and uncertainties that could cause actual
results to differ materially from those projected. These risks and uncertainties include the important risks and uncertainties
that may affect our future operations as discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014,
in Part II — Item 1A of this Quarterly Report on Form 10-Q and in any other filings made with the Securities and Exchange
Commission. Readers of this report are cautioned not to place undue reliance on these forward-looking statements. While we believe
the assumptions on which the forward-looking statements are based are reasonable, there can be no assurance that these forward-looking
statements will prove to be accurate. This cautionary statement is applicable to all forward-looking statements contained in this
report.

Overview

We are a biopharmaceutical company developing
targeted therapies for the treatment of cancer and inflammatory diseases. We use our proprietary technology to create novel small
molecule drug conjugates, or SMDCs, and companion imaging agents. Our SMDCs actively target receptors that are over-expressed on
diseased cells, relative to healthy cells. This targeted approach is designed to enable the treatment of patients with highly active
drugs at greater doses, delivered more frequently, and over longer periods of time than would be possible with the untargeted drug
alone. We are also developing companion imaging agents for each of our SMDCs that are designed to identify the patients whose disease
over-expresses the target of the therapy and who are therefore most likely to benefit from treatment. This combination of an SMDC
with a companion imaging agent is designed to personalize the treatment of patients by delivering effective therapy, selectively
to diseased cells, in the patients most likely to benefit.

Our first generation SMDC, vintafolide,
targets the folate receptor, which is frequently over-expressed on cancer cells. We initially chose platinum-resistant ovarian
cancer, or PROC, a highly treatment-resistant disease, as our lead indication for development of vintafolide because of the high
unmet need in treating this patient population and the high percentage of ovarian cancer patients whose tumors over-express the
targeted folate receptor. In May 2014, we stopped our phase 3 clinical trial in PROC because the treatment arm when compared to
the control arm did not meet the pre-specified criteria for improvement in progression free survival, or PFS, even though the PFS
and overall response rates for the treatment arm of the trial were similar to those of our prior phase 2 trial. In the year ended
December 31, 2014, we recorded a charge of $4.1 million for remaining expenses of the PROCEED trial, including site close-out expenses.
In the nine months ended September 30, 2015, we recorded an additional charge of $0.2 million for remaining expenses of the PROCEED
trial, including additional site and patient expenses.

We have recently completed the TARGET trial,
a randomized phase 2b trial of vintafolide for use in non-small cell lung cancer, or NSCLC, which was designed to evaluate the
safety and efficacy of vintafolide in second line NSCLC as a single agent and in combination with docetaxel, a commonly used second
line chemotherapy approved by the U.S. Food and Drug Administration, or the FDA. As we announced in March 2014, the study met the
primary endpoint of PFS for the combination vintafolide plus docetaxel arm, and we communicated the detailed data, including updated
overall survival, or OS, results, at the European Society for Medical Oncology Congress, or ESMO, in September 2014. At that meeting,
we reported that patients in the predefined adenocarcinoma subgroup treated with the combination had a 27% reduction in risk of
the disease worsening or death and a 30% reduction in the risk of death compared to docetaxel monoth
erapy.
We presented the final OS data at the World Lung Cancer Conference in September 2015. At that meeting, we reported that
vintafolide plus docetaxel improved OS by 2.7 months in NSCLC regardless of histology (Median OS 11.5 vs. 8.8 months, OS
HR=0.86, 95% CI [0.58, 1.26]). In the predefined subset analysis of patients with adenocarcinoma, which expresses higher levels
of folate receptor, vintafolide plus docetaxel improved OS by 5.9 months (12.5 vs. 6.6 months, HR=0.72, 95% CI [0.44, 1.16]). OS
for vintafolide as single agent was similar to docetaxel (OS 8.4 vs. 8.8 months, HR=1.02, 95% CI [0.70, 1.50]). The safety profile
of the combination arm was consistent with those observed with docetaxel alone and vintafolide alone, though a higher rate of hematologic
and peripheral neuropathy adverse events were observed in the combination arm. We intend to assess future development of vintafolide
in NSCLC on various factors, including the results of our ongoing phase 1 clinical trial of EC1456 discussed below.

EC1456, our second generation SMDC, also
targets the folate receptor. We are currently enrolling patients in a phase 1 dose escalation trial for the treatment of advanced
solid tumors with EC1456. In preclinical models, the drug payload, tubulysin, has demonstrated a higher level of potency and less
vulnerability to multi-drug resistance mechanisms compared to the drug payload in vintafolide. In some preclinical models in which
vintafolide demonstrates no activity or there is a resistance to vintafolide, the folate tubulysin SMDC has demonstrated activity.
EC1456 has progressed in the phase 1 trial to a dose that exceeds the dose of vintafolide delivered in trials to date. Patients
are scanned with etarfolatide, but we are not limiting enrollment based on the results of the scan. Once the maximum tolerated
dose is determined, we plan to expand the trial to evaluate EC1456 in NSCLC, triple-negative breast cancer, ovarian cancer and
endometrial cancer in more than 100 patients who are FR(100%) (patients in which 100 percent of their target lesions over-expressed
the folate receptor as determined by an etarfolatide scan). In addition, we plan to evaluate EC1456 in combination with other agents
in these indications to determine the maximum tolerated dose.

18

EC1169, our first non-folate SMDC, is a
tubulysin therapeutic targeting prostate-specific membrane antigen, or PSMA. We have developed a companion imaging agent, EC0652,
to scan patients prior to therapy to identify the presence of PSMA. To date, EC0652 has shown the presence of PSMA in the prostate
cancer of all prostate cancer patients scanned. We are currently enrolling patients in a phase 1 dose escalation trial in recurrent
prostate cancer for EC1169. Once the maximum tolerated dose is identified, we plan to expand this trial to enroll up to 50 patients
at that dose. Patients are scanned with EC0652, but we are not limiting enrollment based on the results of the scan.

In April 2012, we entered into a worldwide
collaboration agreement with Merck Sharp & Dohme Research GmbH, a subsidiary of Merck & Co, Inc., or Merck, regarding the
development and commercialization of vintafolide, which agreement was terminated by Merck effective September 15, 2014. As a result
of the termination of the collaboration with Merck, we are no longer eligible for additional milestone payments from Merck. Pursuant
to the collaboration agreement, we received a non-refundable $120.0 million upfront payment and a $5.0 million milestone payment
in 2012 from Merck. Under the collaboration agreement, we were responsible for the majority of funding and completion of the PROCEED
trial, which was terminated in 2014. We were responsible for the execution of the TARGET trial of vintafolide for the treatment
of second line NSCLC, which is now complete. Merck was responsible for the costs of the TARGET trial through September 15, 2014.
Based on receiving the notice of termination of the collaboration agreement in 2014, we concluded that all of our obligations under
the agreement had been fulfilled and we are not required to perform any additional services to Merck, and as a result, the entire
balance of deferred revenue related to the collaboration agreement was recognized in 2014. We recognized approximately $3.9 million
and $70.3 million of revenue related to the Merck collaboration during the three and nine months ended September 30, 2014, respectively.

As a result of the termination of the PROCEED
trial in 2014, we withdrew the conditional marketing authorization applications in Europe for vintafolide for the treatment of
PROC, and etarfolatide and folic acid for patient selection. During 2014, we terminated contracts and reduced headcount related
to the pre-launch commercial activities in Europe.

Critical Accounting Policies

Our significant accounting policies are
described in more detail in our 2014 Annual Report on Form 10-K. There were no changes in the three and nine month periods ended
September 30, 2015 to the application of the accounting policies that are critical to the judgments and estimates used in the preparation
of our condensed consolidated financial statements.

Results of Operations

Comparison of Three Months Ended September 30, 2014 to
Three Months Ended September 30, 2015

Three Months Ended
September 30,

$ Increase/
(Decrease)

% Increase/
(Decrease)

2014

2015

(In thousands)

Statement of operations data:

Collaboration revenue

$

3,904

$

33

$

(3,871

)

(99

)%

Operating expenses:

Research and development

5,675

6,582

907

16

%

General and administrative

4,007

3,776

(231

)

(6

)%

Total operating expenses

9,682

10,358

676

7

%

Loss from operations

(5,778

)

(10,325

)

4,547

79

%

Interest income, net

161

153

(8

)

(5

)%

Other income (expense), net

(58

)

170

228

393

%

Net loss

$

(5,675

)

$

(10,002

)

$

4,327

76

%

Revenue

The decrease in revenue in the three months
ended September 30, 2015 compared to the three months ended September 30, 2014 was due to the termination of the Merck collaboration
agreement in 2014. Our revenue of $3.9 million recorded in the three months ended September 30, 2014 related primarily to the collaboration
with Merck. Our revenue of $32,500 in the three months ended September 30, 2015 related to the amortization of the $1.0 million
non-refundable upfront payment from Nihon Medi-Physic Co., LTD., or NMP, as well as an annual minimum royalty payment received
in the three months ended September 30, 2015.

19

Research and Development

The increase in research and development
expense in the three months ended September 30, 2015 compared to the three months ended September 30, 2014 was primarily attributable
to an increase in expenses for the EC1456 and EC1169 dose escalation trials, the drug manufacturing expense of EC1456, and an increase
in compensation expense, including noncash stock compensation, partially offset by the decrease in manufacturing expenses of etarfolatide,
our folate-targeted companion imaging agent to vintafolide and EC1456.

Included in research and development expense
were stock-based compensation charges of $1.0 million for each of the three months ended September 30, 2014 and 2015.

Research and development expense included
$0.3 million of expense for each of the three months ended September 30, 2014 and 2015 for company-funded research at Purdue University,
the primary employer of our Chief Science Officer.

General and Administrative

The decrease in general and administrative
expense in the three months ended September 30, 2015 compared to the three months ended September 30, 2014 was primarily attributable
to a reduction in legal and patent expense, slightly offset by an increase in compensation expense, including noncash stock compensation.

Included in general and administrative expense
were stock-based compensation charges of $0.5 million and $0.6 million for the three months ended September 30, 2014 and 2015,
respectively.

Interest Income, net

The decrease in interest income, net in
the three months ended September 30, 2015 compared to the three months ended September 30, 2014 resulted primarily from a decrease
in the average short and long-term investment balances during the three months ended September 30, 2015 as compared to the three
months ended September 30, 2014 which was partially offset by a slight increase in the interest rate yield during the three months
ended September 30, 2015 as compared to the three months ended September 30, 2014.

Other Income (Expense), net

The increase in other income, net in the
three months ended September 30, 2015 compared to the three months ended September 30, 2014 resulted primarily from a favorable
vendor lawsuit settlement in the three months ended September 30, 2015.

The decrease in revenue in the nine months
ended September 30, 2015 compared to the nine months ended September 30, 2014 was due to the termination of the Merck collaboration
agreement in 2014. Our revenue of $70.3 million recorded in the nine months ended September 30, 2014 related primarily to the collaboration
with Merck, including the acceleration of the remaining balance of deferred revenue in the second quarter of 2014 due to the termination
of the collaboration agreement with Merck. Our revenue of $57,500 in the nine months ended September 30, 2015 related to the
amortization of the $1.0 million non-refundable upfront payment from NMP as well as an annual minimum royalty payment received
in the nine months ended September 30, 2015.

20

Research and Development

The decrease in research and development
expense in the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014 was primarily attributable
to a decrease in expenses related to the TARGET trial which is now complete, a decrease in expenses related to the PROCEED trial
which was terminated in May 2014, and a decrease in manufacturing expenses for vintafolide and etarfolatide related to pre-commercial
activity, partially offset by increases in expenses for the EC1456 dose escalation trial and the drug manufacturing expense of
EC1456.

Included in research and development expense
were stock-based compensation charges of $3.4 million and $3.2 million for the nine months ended September 30, 2014 and 2015, respectively.

Research and development expense included
expense of $0.8 million for each of the nine months ended September 30, 2014 and 2015 for company-funded research at Purdue University,
the primary employer of our Chief Science Officer.

General and Administrative

The decrease in general and administrative
expense in the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014 was attributable to the
reduction in headcount and the termination of commercial activities following the withdrawal of the marketing applications in Europe.

Included in general and administrative expenses
were stock-based compensation charges of $2.7 million and $1.9 million for the nine months ended September 30, 2014 and 2015, respectively.

Interest Income, net

The increase in interest income, net in
the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014 resulted primarily from an increase
in the average short and long-term investment balances during the nine months ended September 30, 2015 as compared to the nine
months ended September 30, 2014 due to the investment of proceeds from our public offering of common stock that closed in April
2014, as well as an increase in the interest rate yield during the nine months ended September 30, 2015 as compared to the nine
months ended September 30, 2014.

Other Income (Expense), net

The increase in other income, net in the
nine months ended September 30, 2015 compared to the nine months ended September 30, 2014 resulted primarily from a favorable vendor
lawsuit settlement in the nine months ended September 30, 2015.

Liquidity and Capital Resources

We have funded our operations principally
through sales of equity and debt securities, revenue from strategic collaborations, grants, and loans. As of September 30,
2015, we had cash, cash equivalents and investments of $180.3 million. The following table sets forth the primary sources and uses
of cash for each of the periods set forth below:

Nine Months Ended
September 30,

2014

2015

(In thousands)

Net cash used in operating activities

$

(37,796

)

$

(25,867

)

Net cash provided by (used in) investing activities

(69,329

)

10,897

Net cash provided by financing activities

102,885

453

Effect of exchange rate

(34

)

(1

)

Net decrease in cash and cash equivalents

$

(4,274

)

$

(14,518

)

Operating Activities

The cash used in operating activities for
the nine months ended September 30, 2014 primarily resulted from our net income adjusted for non-cash items and changes in operating
assets and liabilities, including the decrease in deferred revenue related to the Merck collaboration that was fully recognized
in the second quarter of 2014 due to the termination of the Merck agreement. The cash used in operating activities for the nine
months ended September 30, 2015 primarily resulted from our net loss adjusted for non-cash items, primarily consisting of stock-based
compensation, depreciation, and accretion of bond premiums, and changes in operating assets and liabilities, primarily due to a
decrease in the receivable from Merck relating to the former collaboration agreement and a decrease in clinical trial accruals
due to closing out the PROCEED and TARGET trials.

21

Investing Activities

The cash used in investing activities for
the nine months ended September 30, 2014 was due to the purchase of investments using the net proceeds from the public stock offering
in April 2014 and $1.4 million of capital expenditures for equipment, which were partially offset by proceeds from the sale of
investments. The cash provided by investing activities for the nine months ended September 30, 2015 was due to the net result of
the sale, maturities and purchases of investments, which were partially offset by capital expenditures for equipment of $0.3 million.

Financing Activities

The cash provided by financing activities
during the nine months ended September 30, 2014 primarily resulted from $101.9 million of net proceeds from the public stock offering
in April 2014 and $1.0 million received from the exercise of stock options and purchases of stock under our employee stock purchase
plan. The cash provided by financing activities during the nine months ended September 30, 2015 resulted from net proceeds from
the exercise of stock options and purchases of stock under our employee stock purchase plan.

Operating Capital Requirements

We anticipate that we will continue to incur
significant operating losses for the next several years as we pursue the advancement of our SMDCs and companion imaging agents
through the research, development, regulatory and, potentially, commercialization processes.

As of September 30, 2015, our cash, cash
equivalents and investments were $180.3 million. In April 2014, we completed a public offering of 5,175,000 shares of our common
stock and received net proceeds of $101.9 million. We believe that our current cash balance, including the proceeds from that offering,
will be sufficient to fund our current operating plan, including the close-out expenses of the PROCEED and TARGET trials, and the
advancement of our pipeline.

Because of the numerous risks and uncertainties
associated with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amounts
of our working capital requirements. Our future funding requirements will depend on many factors, including but not limited to:

•

the number and characteristics of the SMDCs and companion imaging diagnostics we pursue;

•

the scope, progress, results and costs of researching and developing our SMDCs and companion imaging diagnostics and conducting preclinical and clinical trials;

the cost of commercialization activities if any of our SMDCs and companion imaging diagnostics are approved for sale, including marketing, sales and distribution costs;

•

the cost of manufacturing any SMDCs and companion imaging diagnostics we successfully commercialize;

•

the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcome of such litigation; and

•

the timing, receipt and amount of sales of, or royalties on, our SMDCs and companion imaging diagnostics, if any.

If our available cash, cash equivalents
and investments are insufficient to satisfy our liquidity requirements, or if we develop additional opportunities to pursue, we
may seek to sell additional equity or debt securities or obtain new loans or credit facilities. The sale of additional equity securities
may result in additional dilution to our stockholders. If we raise additional funds through the issuance of debt securities or
convertible preferred stock, these securities may have rights senior to those of our common stock and could contain covenants that
would restrict our operations. We may require additional capital beyond our currently forecasted amounts. Any such required additional
capital may not be available on reasonable terms, if at all. If we were unable to obtain additional financing, we may be required
to reduce the scope of, delay or eliminate some or all of our planned research, development and commercialization activities, which
could harm our business.

Contractual Obligations and Commitments

There have been no significant changes during
the nine months ended September 30, 2015 to the items that we disclosed as our contractual obligations and commitments in our Form
10-K for the year ended December 31, 2014.

22

Off-Balance Sheet Arrangements

None.

Item 3.
Quantitative and Qualitative Disclosures
About Market Risk

We are exposed to market risk related to
changes in interest rates. As of September 30, 2015, we had cash, cash equivalents and investments of $180.3 million. The investments
consisted of U.S. government money market funds, U.S. Treasuries, U.S. Government agency obligations, U.S. corporate securities
and cash equivalents. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general
level of U.S. interest rates. Our short-term and long-term investments are subject to interest rate risk and will fall in value
if market interest rates increase. Due to the short-term duration of our investment portfolio and the low risk profile of our investments,
an immediate 10 percent change in interest rates would not have a material effect on the fair market value of our portfolio. We
have the ability to hold our short and long-term investments until maturity, and therefore we do not expect that our results of
operations or cash flows would be adversely affected by any change in market interest rates on our investments. We carry our investments
based on publicly available information. We do not currently have any investment securities for which a market is not readily available
or active.

We do not believe that any credit risk is
likely to have a material impact on the value of our assets and liabilities.

Our management, with the participation of
our principal executive officer and our principal financial officer, evaluated, as of the end of the period covered by this Quarterly
Report on Form 10-Q, the effectiveness of our disclosure controls and procedures. Based on that evaluation, our principal executive
officer and principal financial officer concluded that our disclosure controls and procedures as of such date are effective at
the reasonable assurance level in ensuring that information required to be disclosed by us in the reports that we file or submit
under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the
reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive
officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There has been no change in our internal
control over financial reporting during the three months ended September 30, 2015, that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.

You should carefully consider the risks
and uncertainties we describe in this report and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014
before deciding to invest in, or retain, shares of our common stock. Additional risks and uncertainties not presently known to
us or that are currently not believed to be significant to our business may also affect our actual results and could harm our business,
financial condition, results of operations, cash flows or stock price. If any of these risks or uncertainties actually occurs,
our business, financial condition, results of operations, cash flows or stock price could be materially and adversely affected.
Except as set forth below, there have been no material changes to the risk factors discussed in our Annual Report on Form 10-K
for the fiscal year ended December 31, 2014.

We may be at risk for cyber attacks or other security
breaches that could compromise our intellectual property, trade secrets or other sensitive business information and expose us to
liability, which would cause our business and reputation to suffer.

Cyber attacks or security breaches could
compromise confidential, business critical information, cause a disruption in our operations, harm our reputation or increase our
stock trading risk. We have attractive information assets, including intellectual property, trade secrets and other sensitive,
business critical information, including personally identifiable information of our employees. Our employees, some of whom
have access to such information, frequently receive “phishing” emails intended to trick recipients into surrendering
their user names and passwords. Phishing is a fraud method in which the perpetrator sends out legitimate-looking email in
an attempt to gather personal, business, financial or other information from recipients. To date, we have found no evidence
of unauthorized access to our employees’ accounts, but cannot preclude the possibility that sensitive information has been
accessed, publicly disclosed, lost or stolen.

We have cybersecurity technologies, processes
and practices that are designed to protect networks, computers, programs and data from attack, damage or unauthorized access, but
we cannot assure that they will be effective or will work as designed. Our cybersecurity is continuously reviewed, maintained
and upgraded in response to possible security breach incidents. Notwithstanding these measures, a cyber attack could compromise
our networks and data centers and/or result in access, disclosure, or other loss of information, which could result in legal claims
or proceedings, investigations, potential liabilities under laws that protect the privacy of personal information, delays and impediments
to our discovery and development efforts, damage to our reputation and a negative impact on our financial results.

Item 5.

Other Information

During the quarter ended September 30, 2015,
the Audit Committee of our Board of Directors did not approve the engagement of Ernst & Young LLP, our independent registered
public accounting firm, to perform certain non-audit services and no such services were provided during this period. This disclosure
is made pursuant to Section 10A(i)(2) of the Securities Exchange Act of 1934, as added by Section 202 of the Sarbanes-Oxley
Act of 2002.

Item 6.

Exhibits

See the Exhibit Index following the signature
page to this Quarterly Report on Form 10-Q.

24

SIGNATURES

Pursuant to the requirements of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

ENDOCYTE, INC.

Date: November 4, 2015

By:

/s/ P. Ron Ellis

P. Ron Ellis

President and Chief Executive Officer

(Principal Executive Officer)

Date: November 4, 2015

By:

/s/ Michael A. Sherman

Michael A. Sherman

Chief Operating Officer and Chief Financial Officer

(Principal Financial Officer)

Date: November 4, 2015

By:

/s/ Beth A. Taylor

Beth A. Taylor

Corporate Controller

(Principal Accounting Officer)

25

EXHIBIT INDEX

Exhibit

Number

Description

31.1

Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934 of the Chief Executive Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934 of the Chief Financial Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101

The following materials from Endocyte, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, formatted in Extensible Business Reporting Language (XBRL) includes: (i) Condensed Consolidated Balance Sheets at December 31, 2014 and September 30, 2015, (ii) Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended September 30, 2014 and 2015, (iii) Condensed Consolidated Statements of Stockholders’ Equity for the nine months ended September 30, 2015, (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2014 and 2015 and (v) Notes to Condensed Consolidated Financial Statements.

26

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a)
OF THE SECURITIES
EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, P. Ron Ellis, certify that:

1.

I
have reviewed this quarterly report on Form 10-Q of Endocyte, Inc.;

2.

Based
on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect
to the period covered by this report;

3.

Based
on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented
in this report;

4.

The
registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The
registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ P. Ron Ellis

P. Ron Ellis

President and Chief Executive Officer

Date: November 4, 2015

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a)
OF THE SECURITIES EXCHANGE ACT

OF 1934, AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, Michael A. Sherman, certify that:

1.

I
have reviewed this quarterly report on Form 10-Q of Endocyte, Inc.;

2.

Based
on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect
to the period covered by this report;

3.

Based
on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented
in this report;

4.

The
registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The
registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Michael A. Sherman

Michael A. Sherman

Chief Operating Officer and Chief Financial Officer

Date: November 4, 2015

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, P. Ron Ellis, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report
of Endocyte, Inc. on Form 10-Q for the quarter ended September 30, 2015 fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934, as amended and that information contained in such Quarterly Report on Form 10-Q
fairly presents in all material respects the financial condition and results of operations of Endocyte, Inc. for the periods
covered by such Quarterly Report on Form 10-Q.

November 4, 2015

/s/ P. Ron Ellis

Name:

P. Ron Ellis

Title:

President and Chief Executive Officer

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael A. Sherman, certify, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report
of Endocyte, Inc. on Form 10-Q for the quarter ended September 30, 2015 fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934, as amended and that information contained in such Quarterly Report on Form 10-Q
fairly presents in all material respects the financial condition and results of operations of Endocyte, Inc. for the periods
covered by such Quarterly Report on Form 10-Q.